As the years have passed by, the mediums of payment have also changed over the years. Starting from the barter system, which transitioned towards a unified medium of currency in the form of money, it became paperless money in credit and debit cards. But now, an even more significant transition is in the works, with cryptocurrency on the rise. And when the word cryptocurrency rings in one’s head, the next thing that pops up is undoubtedly bitcoin.
unless you have been living under a rock, I am sure you know what Bitcoin is. Bitcoin is a digital currency that was created in January 2009. It follows the ideas set out in a whitepaper by the mysterious and pseudonymous Satoshi Nakamoto. Now that we know what this exactly is, we shall have an in-depth look at the advantages and disadvantages of Bitcoin.
Bitcoin purchases are discreet. Unless a user voluntarily publishes their Bitcoin transactions, their purchases are never associated with their identity, much like cash-only purchases. They cannot easily be traced back to them in any way whatsoever. This is not to say that bitcoin transactions are genuinely anonymous or entirely untraceable, but they are much less readily linked to personal identity than some traditional payment forms. This guarantees your safety on the internet whenever you make a transaction related to Bitcoin.
One of the most important advantages of Bitcoin is its autonomy. Digital currencies allow users more autonomy over their own money than fiat currencies do, at least in theory. Users can control how they spend their money without an intermediary authority like a bank or government.
Elimination of Banking Fees
Bitcoin transactions take miscellaneous banking charges out of the picture. Bitcoin users are not subject to the litany of traditional banking fees associated with fiat currencies; this means no account maintenance or minimum balance fees, no overdraft charges and no returned deposit fees, and much more.
Like with many online payment systems, Bitcoin users can pay for their coins anywhere they have Internet access. Purchasers never have to travel physically to any place such as a bank or a store to buy a product. However, unlike online payments made with bank accounts or credit cards, personal information is unnecessary to complete any transaction. You can buy or sell a Bitcoin with complete anonymity.
Low Transaction Fees for International Payments
Standard wire transfers and foreign purchases typically involve fees and exchange costs. Since bitcoin transactions have no intermediary institutions or government involvement, transacting prices are kept very low. This can be a significant advantage for travelers. Additionally, any transfer in bitcoins happens quickly, eliminating the inconvenience of typical authorization requirements and wait periods. With low transactions and no bank fee at all, transactions will be carried out very smoothly.
The Bitcoin payment system is purely peer-to-peer, meaning that users can send and receive payments to or from anyone on the network worldwide without requiring approval from any external source or authority.
As a digital technology, Bitcoin will be subject to cybersecurity breaches and may fall into hackers’ hands. We have already seen evidence of this, with multiple ICOs (initial coin offering) getting breached and costing investors hundreds of millions of dollars this summer alone (one of these attacks by itself resulted in the loss of $473 million). Mitigating this will require continuous upkeep of security infrastructure. Still, we are already seeing many players dealing with this directly and using enhanced cybersecurity measures that go beyond those used in the traditional banking industries.
Price volatility is something that hurts the crypto ecosystem. It is a significant concern, but one can be overcome by linking the Bitcoin value directly to tangible and intangible assets (as we have seen some new players do with diamonds or energy derivatives). Increased adoption should also increase consumer confidence and decrease this volatility.
Probably the most significant concern with Bitcoin is the problems with scaling that are posed. While the number of digital coins and adoption is increasing rapidly, it is still dwarfed by the number of transactions that payment giant, VISA, processes each day. Additionally, a transaction’s speed is another critical metric that cryptocurrencies cannot compete with on the same level as players like VISA and Mastercard until the infrastructure delivering these technologies is switched to a higher level.
The regulations administered over Bitcoin are a lot. Even if we perfect the technology and get rid of all the problems listed above, until the technology is adopted by federal governments and regulated, there will be an increased risk in investing in this technology. Since many governments still haven’t wrapped their heads around what this is, they’ll never be comfortable allowing it to go through with it being banned in quite many countries in the present day. Other concerns with the technology are mostly logistical. For example, changing protocols, which becomes necessary when the tech is being improved, can take quite a long time and interrupt the normal operation flow.
Bitcoin scams, dark web heists, and cryptocurrency exchange hacks have also deterred some users even though financial crime, cybersecurity risks, and money laundering are unfortunately all risks inherent to traditional and more innovative payment systems alike.
Now that we’ve notified ourselves of what Bitcoin is, its pros, and its cons, we can now conclude whether to go on and buy it or not. One thing that is to be remembered is that Bitcoin is extremely volatile, and you should always invest money that you can afford to lose. Going and investing your life savings in cryptocurrency is NOT recommended. It takes you years to save money, don’t go and waste it on the thought that you could become a millionaire overnight; nothing is that easy.